Federal Judge Rules Against Subpoena of Powell, Says Subpoena Aimed to Pressure Fed to Cut Rates

Reuters Finance APP — Amid escalating conflicts between the U.S. and Iran, rising inflation pressures, and energy crises, a federal judge issued a strongly worded ruling last Friday (March 13), officially blocking a grand jury from issuing a subpoena to Federal Reserve Chair Jerome Powell.

Judge James Boasberg of the U.S. District Court for the District of Columbia explicitly stated in the ruling that “ample evidence” suggests the subpoenas were issued to pressure the Fed into rapidly cutting interest rates, which has been a long-standing public demand of President Trump.

DC Federal Prosecutor Slams Ruling as “Ridiculous” and Announces Appeal

Prosecutor Jeanine Pirro held a press conference immediately after the ruling, sharply criticizing Boasberg’s decision.

She said, “This ruling is outrageous.” She added, “Jerome Powell is now granted full immunity, which is wrong and lacks legal basis.” Pirro announced that the Department of Justice will immediately appeal the decision.

The subpoenas, ostensibly related to a hundreds-of-millions-of-dollars renovation project at the Fed headquarters in Washington and Powell’s testimony before the Senate Banking Committee on the matter, were directly challenged by Judge Boasberg in a ruling signed last Wednesday and unsealed last Friday. The judge pointed out that evidence shows Pirro’s true motive was to force Powell to comply with President Trump’s demand for a sharp rate cut.

He wrote, “Did the prosecutors issue these subpoenas for legitimate purposes? The court finds not.” He further stated, “Mounting evidence indicates that the government issued these subpoenas to pressure the Chair into voting for rate cuts or resigning.”

The judge added, “On the other hand, the government has offered almost no evidence to suggest Chairman Powell committed any crime; in fact, the reasons are so weak and unfounded that the court can only see them as pretexts.”

Therefore, the court found the subpoenas were issued with improper purpose and will be revoked.

North Carolina Republican Senator Thillis: Ruling Confirms Investigation Is “Unfounded”

North Carolina Republican Senator Thom Tillis posted on X last Friday that he expects the ruling to stand.

He wrote, “This ruling confirms how weak and unfounded the criminal investigation into Chairman Powell is — just an attack on the Fed’s independence.” He added, “We all know how this will end; the DC federal prosecutor’s office should avoid further embarrassment.”

Powell’s Term Could Last Until May, Waller’s Appointment Blocked

This ruling likely means Powell will remain Fed Chair until his term ends in May.

Tillis has publicly pledged to block Kevin Warsh’s nomination to succeed Powell in the Senate Banking Committee until the federal investigation is fully resolved. This stance could cause a deadlock, preventing Waller from gaining a full Senate vote.

Trump’s long-standing desire for further aggressive rate cuts has become more complicated amid the Iran conflict.

Rising energy costs make it difficult for policymakers to ease before the situation clarifies. Recent Fed officials’ statements have been cautious, with only Governor Stephen Miran and Christopher Waller explicitly supporting lower rates.

Market expectations for rate cuts have been pushed back to the end of the year, from at least two cuts priced in before the war.

Despite Trump’s nomination of Waller and his pro-easing stance, markets have not priced in additional rate cuts.

The next FOMC meeting is scheduled for March 18, with traders currently nearly certain rates will stay unchanged.

Boasberg’s ruling and the Department of Justice’s appeal process will keep the debate over Fed independence alive, further complicating monetary policy paths.

An extension of Powell’s term amid the Iran conflict, inflation pressures, and energy crises suggests U.S. interest rates may stay high longer, posing ongoing challenges to Trump’s economic promises and midterm elections.

Overall, this rare criminal investigation targeting the Fed Chair has been thwarted, representing a significant setback to Trump’s efforts to pressure the Fed into rate cuts, and highlighting intense battles between U.S. judicial and executive branches over Fed independence. Judge Boasberg’s finding of “ample evidence” indicating improper purpose directly challenges executive interference attempts.

In the coming months, the Department of Justice’s appeal outcome, Waller’s confirmation process, and developments in the Iran conflict will jointly influence the Fed’s policy space and U.S. economic direction.

Investors should closely monitor the March 18 FOMC statement, judicial proceedings, and Middle East developments to assess the true risks to interest rate paths and asset prices. In the short term, the likelihood of the Fed maintaining high rates increases, supporting the dollar and U.S. Treasury yields, while stocks and growth equities may face greater pressure.